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Exam 24: Managing Risk

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Question 81

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Kuhlman Appliances produces all of its products in one gigantic production facility near an earthquake fault line.Kuhlman is the classic example of a firm that should use self-insurance to manage its risks.

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Question 82

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The ________ says that an insured person cannot collect more than the actual loss from an insurable risk.

A) law of large numbers
B) rule of indemnity
C) law of diminishing returns
D) rule of finite loss coverage

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Question 83

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Product liability insurance covers liability arising out of defective products sold.

One way to lower the need for outside insurance is to self-insure.

"Going bare" is a much less risky strategy for self-insurance.

________ is a term that refers to the chance of loss,the degree of probability of loss,and the amount of possible loss.

Which of the following is the risk that most concerns businesspeople?

There are two different kinds of risk: passive and active.

An example of an uninsurable risk would be the potential losses suffered by Domino's Pizza resulting from a popular new product from Pizza Hut.

________ insurance provides coverage against liability arising out of the sale of goods to customers.

Preferred Provider Organizations PPOs)offer members the opportunity to choose their own physicians.

Risk management involves minimizing the losses from unexpected events.

Discuss the difference between HMOs and PPOs.

In designing an addition to his successful nursing home,Steve realized that water sprinklers and smoke detectors were now required by state regulations.His existing structure already had sprinklers and detectors because he felt that this was an effective strategy to:

Marianne has just graduated from college and as part of her orientation in her new job she must choose the type of health insurance plan she would like.She is new to the area and really wants to budget carefully as she would like to buy a new home as soon as she saves up enough money.She considers herself a healthy young person of 22.Which of the following pieces of advice is the most sensible for her to follow in choosing an insurance plan?